But since the program began in 2008, not a single company has taken the handout.
Even its champion, Sen. Jim Kastama, now agrees with legislative auditors that the program should be dumped. He figures there are other ways to help manufacturers become more efficient.
“I was hoping to do that in this piece of legislation. We clearly missed the mark,” said Kastama, a Puyallup Democrat. “But that doesn’t mean what we were trying to do was not valuable to companies in Washington state.”
The Manufacturing Innovation and Modernization Extension Service program will expire June 30, 2012, unless the Legislature renews it. Legislative auditors say it should be allowed to lapse, in a report they will present today to the Joint Legislative Audit and Review Committee.
The Department of Commerce spent $44,573 setting up the program and then rewriting its rules to loosen lending criteria in hopes of attracting applicants.
Two or three companies showed enough interest that a Commerce employee spent time looking at their balance sheets and preparing materials for them, said Nick Demerice, the agency’s government affairs director.
But none would bite. For some companies able to obtain bank loans, the 5 percent interest that would have to be paid back to the state didn’t look like a good deal, said John Vicklund, president of Impact Washington, the federal government-created nonprofit that proposed the loan program.
What’s more, a company’s owner would have had to personally commit to paying back a loan. Vicklund said that and other requirements turned employers off.
“Many manufacturers told us that the extra paperwork and information being asked for was just not worth it,” he said.
Lawmakers could have done one thing to make the program palatable, Vicklund said: give businesses a tax credit by letting them deduct half the cost of their upgrades from their business taxes.
But a proposal to do that was stripped from the 2008 bill as it moved through the Legislature. These days, the cost of tax breaks to the state is being looked at even more skeptically as lawmakers figure out how to bridge a new budget shortfall of more than $1 billion.
The program was modeled on another state program that helps businesses train their employees in the state’s community colleges – and that program does offer a tax credit.
The money has a more specific purpose: helping small manufacturers. It was intended to provide a few thousand dollars at a time in the form of a voucher, not a cash loan, that can be used only to pay for the services provided by Impact Washington.
The agency helps companies improve performance and productivity, trains them on international standards of quality and helps them develop new products, markets or sales approaches.
“We proposed (the loan program) to many companies,” Vicklund said, “and they look at it and they say, ‘So basically the state is the bank, and I’ve got to pay it off in 18 months – and I don’t get any tax credit for it and there’s no assistance. The state’s just making money available. I can do that at the bank if I really want to.’”
But Vicklund said companies are usually using their lines of credit at banks for other purposes. And some companies, of course, are unable to get loans at all – though Demerice said most credit-worthy businesses are getting credit.
Vicklund said the agency would tell the Legislature there’s still a need to help businesses pay for the services Impact Washington provides. But neither he nor Demerice predicted their agencies would fight to keep the program going.
Neither will Kastama. “I think that at this point the smartest thing to do is to put our money into things that in fact are working, that don’t need those kind of tweaks and legislative action,” he said, “and so I’m fully in support of, if it doesn’t work, we get rid of it at this point.”
Jordan Schrader: 360-786-1826 jordan.schrader@thenewstribune.com blog.thenewstribune.com/politics
Twitter: @Jordan_Schrader
